If USI Holdings Corp. ultimately decides to come under private equity ownership, it would be one of a string of recent deals involving private equity in the retail brokerage industry.

"Within the past 24 months there has been a massive influx of capital into the insurance distribution system for a number of reasons," said John Wepler, president of Marsh Berry & Co. in Concord, Ohio.

Not only is there an "overwhelming perception" within the private equity industry that the insurance distribution system is more fragmented than other financial services sectors, but there also is a proven track record of brokerages that "have taken on capital, built up their operations and have gone public," he said.

In 1998, for example, Kohlberg Kravis Roberts & Co. acquired then-publicly traded Willis Group Holdings Ltd., took it private, built up the firm and raised $270 million in an initial public offering in 2001.

At the same time, private equity firms are attempting to time the insurance cycle by investing in an insurance brokerage today, Mr. Wepler said. With the belief that the soft market will last another five to seven years, if a private equity firm infuses capital today, it can then focus on building the brokerage over several years, float a small percentage of stock in the market via an IPO and then "time it so they can dribble out more stock and get full liquidity (for their shareholders) before the hard market ends," Mr. Wepler said.

Among the recent deals in the retail brokerage industry involving private equity:

• Former Hilb Rogal & Hobbs Co. President Robert Lockhart launched middle-market brokerage Kinloch Holdings Inc. with equity capital from Northhaven Management Inc. of New York and CCP Equity Partners of Hartford, Conn. (BI, Oct. 9).

• Kansas City, Mo.-based Lockton Cos. Inc. recently acquired a 51% stake in Alexander Forbes International Risk Services in a deal involving Trident III L.P., an investment fund managed by Greenwich, Conn.-based Stone Point Capital L.L.C., which owns the remaining shares (BI, Aug. 28).

• Bethesda, Md.-based American Capital Strategies Ltd. in May invested $35 million in New York brokers Tanenbaum-Harber Co. Inc. and Thesco Benefits L.L.C.

• And earlier this month, Marsh & McLennan Cos. Inc. rejected an acquisition offer from Willis, which involved financing by KKR (BI, Oct. 23).